Suchergebnisse

We set up a simple model of tax competition for mobile, highly-skilled and overconfident managers. Firms endogenously choose the compensation scheme for managers, which consists of a fixed wage and a bonus payment in the high state. Managers are overconfident about the probability of the high state and hence of receiving the bonus, whereas firms and governments are not. When governments maximize tax revenues, we show that overconfidence unambiguously reduces the bonus tax rate that governments set in the non-cooperative tax equilibrium, while increasing tax revenues. When the government objective incorporates the welfare of resident managers, however, bonus taxes also serve a corrective role and may rise in equilibrium when overconfidence is increased.

We set up a simple model of tax competition for mobile, highly-skilled and overconfident managers. Firms endogenously choose the compensation scheme for managers, which consists of a fixed wage and a bonus payment in the high state. Managers are overconfident about the probability of the high state and hence of receiving the bonus, whereas firms and governments are not. In this setting we show that overconfidence (i) unambiguously increases the bonus component in the managers' compensation package and (ii) it reduces the bonus tax rate that governments set in the non-cooperative tax equilibrium. Hence overconfidence can contribute to explaining both the increasing role of bonus contracts and the fall in marginal tax rates for high-income earners.

Multinational companies can shift profit and income between branches in order to reduce the overall tax liabilities of the company. The result is a tax competition between countries. In this paper we consider the sequential choice of tax rates to illustrate the potential effects of tax leadership. We use a profit shifting model with multinational firms that operate in two countries, large and small. Governments compete by setting source-based corporate income taxes. We show that: (i) the sequential tax equilibria always Pareto dominate the simultaneous tax equilibrium. (ii) Each country prefers to follow than to lead the tax game. (iii) The tax leadership by the large country risk-dominates the tax leadership by the small country. Therefore our analysis provides a plausible explanation for the endogenous emergence of the tax leader- ship by the large countries. The results are contrasting with previous results in the literature.

Multinational companies can shift profit and income between branches in order to reduce the overall tax liabilities of the company. The result is a tax competition between countries. In this paper we consider the sequential choice of tax rates to illustrate the potential effects of tax leadership. We use a profit shifting model with multinational firms that operate in two countries, large and small. Governments compete by setting source-based corporate income taxes. We show that: (i) the sequential tax equilibria always Pareto dominate the simultaneous tax equilibrium. (ii) Each country prefers to follow than to lead the tax game. (iii) The tax leadership by the large country risk-dominates the tax leadership by the small country. Therefore our analysis provides a plausible explanation for the endogenous emergence of the tax leader- ship by the large countries. The results are contrasting with previous results in the literature.